A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.

March 11, 2008

Bernanke sure knows when to step in and help out his Wall Street masters.

But the only way out of this mess is to create new and even bigger bubbles, and a 0% interest rate policy and dollars falling from helicopters are gonna pump something up. Commodities and foreign currencies got the first bump, but you know damn well his top objective is to create a new stock market bubble.

When a nation loses its manufacturing base and incomes are declining, "equity extraction" and cap gains are really the only way we can keep this scheme going.

So, is today a classic dead cat bounce? Will we rally from here, or fall to lower lows?

And is there any chance housing could see a dead cat bounce? A false rally before heading lower again? Or will it continue down in a linear fashion until we're back below where we started?

"We see markets leveling off ahead of the earnings announcements from the banks and ahead of the hedge fund earnings reports. As the week progresses, uncertainty will arise again. We have just sold off so much right now, I think we are in for a dead-cat bounce," said David Spegel, global head of emerging markets strategy at ING in New York.

His 200 billion stimulus may sound like a lot but it's really pocket change compared to the trillions in shakey mortgages. It's just an attempt to calm the markets. So far it's working but the next round of bad news will be the test.I suppose now we'll hear from DOPES about how the market is "soaring" and everything is back to the Goldilocks economy.

The market has been surging on anything casting a shadow that resembles good news. Next thing you know the market will bounce when a Wall Street Trader spills coffee on his shirt and it looks like (insert favorite deity).

The market may bounce and even run back to 13K+ for a while, but as long as housing is falling and defaults continue, there can be no recovery. Also, don't forget that today made up for the last 3 days of destruction and hardly marks a change in trend.

Ben has only a few rounds of ammo left and but the credit crisis storm has several years left to go in terms of the various financial innovations self destructing. Once Ben has spent his last round and you get the last dead cat bounce then we will see how the market fairs, I predict sometime early in the next administration all this will come to fruition and we'll be in for a pretty rocky time for a long time to come!!

This dead cat died from eating Superballs! It is the bounce heard around the world.

If you're long almost anything the next phase will likely be your last good exit point. Gold, some commodities and agriculture being the obvious exceptions.

To labor the obvious: every company that has got a large capital infusion and seen an immediate huge bounce has had a dramatic and far larger drop shortly afterwards. THE ENTIRE WORLD JUST GOT A HUGE CAPITAL INFUSION!!

I predicted to my group of friends on Sunday evening that, "stock sellers were exhausted" and this week would likely end in the black for a change. . .Ben just greased the wheels a bit, but the underlying problems remain - too many houses, prices too high for incomes, and the lack of subprime phoney loans to pump the RE market back up. . .actually, the Stock Market may have a continued rally if the Fed buys the CDO's as a buyer of last resort. . .let's face it, the low end of the housing market is the worst hit, and people with money - top 20% still are fine. . .the bottom 20% can be left behind, and the econmy will barely notice.

we go from stock market bubble to housing bubble right back to stock market bubble. the cycle is complete.

you can't legislate your way to prosperity, and you can't print your way to prosperity either. ultimately, prosperity comes from productivity, and we just don't have it anymore.

our economy has no fundamentals, so ultimately we're just selling assets and printing dollars that we think we can unload on saturated foreigners. it's the beginning of a permanent decline. government intervention will only make it worse, not better.

Actually, if you read between the lines, this looks like an attempt to provide an alternative to additional rate cuts. My guess is Ben is hoping he can ease the liquidity crisis by buying off a bunch of this toxic garbage from these half dead banks thereby avoiding the need to decrease rates further.

If you look at the general sentiment, people are now asking why these rate cuts are required? Job market is somewhat shaky but still strong. For those that were fiscally responsible, they are now voicing themselves asking how the hell helicopter ben can justify continuously lowering interest rates when we have $108 oil and a rapidly depreciating currency?

Next move by the Fed should be interesting. Its possible that this stimulus might be a preamble to basically letting the folks know that no more rate cuts are coming.

I'm having a really hard time figuring out wat the hell benny did this time. As I understand it, they temporary replace bank's junk bond with treasury notes(or sound money, not sure), to make it looks like everything's ok on bank's account this trimester. But here's the trick: why in hell would bank want to pay back, since their guarantee is exactly what they don't want to hold? If they don't what happens, since what they lose ain't worth anything? Seems to me they find themselves with treasury notes, that is, the government own them... Also, in that case, who is now accountable for the crappy debt? I seriously hope there is some kind of drawback for them not fulfilling the contract, because if that's not the case, all I see is the banks just stole $200.000.000.000 from the American Government.

Fed free money or no Fed money, banks know other banks have almost ruined them. Why would they want to take that chance with off the book bets again until positive proof of profit from derivatives. The banks now realize how fast a small lost from a QUADRILLION dollars derivative market can stop the buck. My advice to the banks is take the money and RUNNNNNN!!!!

So... with Fannie and Freddie holding all the good mortgages, and the Fed holding all the, uh, not so good mortgages, does that mean the Feds have nationalized the housing stock?

Would that be a basis for a new tax system? Repeal the income tax and everybody pay their mortgage interest to the Federal government instead? 7% on 20T is 1.4T... enough revenue to cover the income tax. SS/medicare revenues could cover the rest.

It seems like BB just gave the banks a liar loan. The banks lie about how much their assets are worth and BB gives them money based on that "collateral." If those assets go bad, the banks can mail the worthless paper in to the fed. Worse than jingle mail because you can't even hear it coming....

We out-sourced our manufacturing aswell as technical knowledge, the two key components necessary for a thriving economy over a sustained period of time.

Health-Care, and other public service jobs are not what we need more of - and they require tax dollars which once came from a solid manufacturing and IT base.

We are becoming more and more dependent on foreign countries.

Anonymous said... we go from stock market bubble to housing bubble right back to stock market bubble. the cycle is complete.

you can't legislate your way to prosperity, and you can't print your way to prosperity either. ultimately, prosperity comes from productivity, and we just don't have it anymore.

our economy has no fundamentals, so ultimately we're just selling assets and printing dollars that we think we can unload on saturated foreigners. it's the beginning of a permanent decline. government intervention will only make it worse, not better.

I sold all my longer term puts this AM. But I do have a moon shot el cheapo put positon for the next two weeks. Won't hurt if I loose it but I need to keep some kind of put position to be sane. They can play their little fed save the world game. Its all being monetized -- look at the gold price! Stock price not going down? Oh, its because the dollar is cheaper so the sp stayed the same. When they want to lower the gold price ... its a fiat shell game.

Looks like the government is intervening again. I'm starting to believe this economy is completely managed via black box computers and fiat money. The bid and ask prices do not reflect reality. Anything to preempt the recession. But this only makes the recession worse.

You have to wonder if they will miraculously run out of bullets around November. Surprise! Surprise! That is when the election will be over.

As if they think they can prevent a recession. North eastern blind hubris it must be.

You know they outted Spitzer because he called the Mortgage insurers to fix it in a week.

it seems like gold moved upward in leaps and bounds but i can't tie the leaps to specific bad news. seems like this news would indicate fear in the market and shoot gold over $1,000 but it didn't. Why?

Hey, count me in for the next bubble. I'll commit every single fraud out there since the FBI is not really interested in pusruing types like Casey Serin, the Wall Street crooks get bailouts with taxpayer money, Bush's cronies get outrageous rich contracts out of a fake war in Iraq, the crook Arabs are laughing all the way to their own American banks, so are the stinky Chinese.

The message out there is: IT PAYS TO BE A CROOK IN AMERICA. AND ALL AMERICANS ARE CROOKS.

So count me in for the next ponzi scheme created by the Fed. No more Mr. Honest Guy here.

BTW, let's all vote for McCain and burn this mofo down for good. Mad Max ain't got sh!t on us!

Do you hear that sound, Mr. Bernanke? That's the sound of inevitability.

Sucker's rally to save the banks for one more quarter and to fool with this rigged market. Nobody believes in Americans or the American market anymore. The bankers are using Bernanke's money to buy Treasuries and not for lending.

Last time I checked, 3/4 of the American GDP comes from consumers. Too bad, as the country is doomed with mass unemployment, no easy credit, no home equity, flat wages, outsourcing, wars, no savings, no trust, no investment in infrastructure, etc, etc, etc.

The $200 Bil may give a short term bump to the market but the inevitable will still happen....housing and stock market declines.

The money only makes available some funds for banks to lend. But people still won't be borrowing that money to buy houses because everyone knows the bubble has burst and prices are going down, down, down. No one wants to get stuck with a falling asset at this point.

So, yes, the banks can get this money to lend but they still need people to want to buy houses, which they simply won't do.

But here's the trick: why in hell would bank want to pay back, since their guarantee is exactly what they don't want to hold?

You're assuming that the bank will never ever borrow money at the discount window again. You're also assuming that the Fed won't be able to take other assets from the bank. This action is allowing the banks to slowly take losses and put more money into the asset side of the balance sheet from earnings over the next few years. The Fed is hoping that eventually the earnings will be able to offset the losses and the bank won't be insolvent.

Today's action was nothing more than a bailout to stop the implosion of some of the PDs and agencies. The Fed did not "add" liquidity, the swaps are just that, swaps + interest, they technically are a net drain of liquidity. They are giving life support and pain meds to PDs, banks and agencies hoping beyond all hope that a miracle happens in the next 2 months. This is the second time is almost as many days that the have given the paddles to the dealers, only to have them start flat-lining soon after. Now the Fed has gone full Jim Jones and taken some of the poison themselves. If anything happens in the next couple weeks/months to those AAAs now helded as collateral, (ie. downgrades, further home price declines, further foreclosures, further "jingle mail" stories.) they can either force a margin call and/or force default on the PDs, banks and agencies that put up the stuff for collaterall, which will cause an automatic conflagration of the PDs, banks and agencies that put the stuff up. Or they can choose to let the poison do its work and explode themselves, bringing down the whole thing. Choose the former and we survive, bloodied, battered and scared as hell from being up close and personal with Beelzebub, Mephistopheles, Satan, el diablo, etc. Choose the latter and it is a full collapse of the system, the whole system. Period!

The FED didn't drop 200b from a helicopter. They traded treasuries for MBS paper. Kinda like when you were a kid and traded your ham sandwich for a twinkie... You still have something to eat and no money changed hands, but in the long run when you look back someone got the ca-ca end of the stick...

That'd be the FED in this case as the ABX says AAA paper is worth 53-70 cents and the FED bought it at 80 cents...

This is a zero for equities, but anyone who listens to cramer can't be all that smart...

The primary banks have been shorting treasuries and loosing money. So they went to the FED and borrowed more treasuries and are going to short them to try and stop the short squeeze. If they can't, they blowup and the FED gets their crappy assets...

So then maybe the FED gets the treasury to flood the market diluting the existing bonds and driving the price down so the banks can cover.

This will spike rates and the resulting sell off because of the manipulation will spike rates even farther. 20% mortgages anyone?

The bond market may even "get it" and they just might sell off even if the FED doesn't play games. Again... 20% mortgages?

That's sure to fix housing...

Ben just stuck his thinggy into a remote turbine powered meat grinder... He's just hoping he's got the only on/off switch...

End game time for the USD. The Dow will be 30K by the end of 2008. Gasoline will be $6/gal, and Jesus Christ himself couldn't qualify for a jumbo mortgage.

The next administration will implement credit controls along with wage and price controls. Mexico and Canada will have to beef up border security and build fences to keep American economic refugees from swarming across the borders.

The 200B was not printed....it was created on a computer by upping the balance sheets of key banks.

Our financial system is like a tall tower built on bubble, inflation, belief, etc. It has gotten too tall and is "wobbling".

Any attempt to add more "height" to the tower will result in the tower becoming more unstable and finally a point of no return will be reached and the whole thing will come crashing down.

By taking the reckless and unethical course to keep the piggies trough full of food, the FED has doomed America to a "crash". The only question is how much higher the tower can be built before the point of unstability is reached...

stock market may be bullishof course not financials or mortgage lenders which are doomed...but if Inflation is back, any non-levered firm, will make a lot of (inflated) $... even there is a depression. stocks are an excellent hedge to inflation.$ will be destroyed

stock market may be bullishof course not financials or mortgage lenders which are doomed...but if Inflation is back, any non-levered firm, will make a lot of (inflated) $... even there is a depression. stocks are an excellent hedge to inflation.$ will be destroyed

It's a new paradigm, and everybody who doesn't buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.

Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities, and Hondas.

This asset bubble is different than all of the others - it will never slow down, or pop. The gains are permanent.

When the Banks are not able to pay back the billions in short term loans the Feds injected ,than the Banks will just walk like the sub-prime borrowers are walking .(not really ).These short term loans from the Feds (based on junk paper from banks etc.) have kept the banks going until they get the system set up to pass the bad loans on the books of the banks to a government backed or insured entity .Oh sure the lenders will have to pay some of the loss ,and the taxpayers will have to pay some of the loss ,and some of the investors and borrowers will be taking some of the loss ,but the wrong parties are going to be taking most of the loss .

Winners (1)Speculator and gambler and liar loan borrowers walking (who had no skin in the game ,who might even get free rent for 12 months(2)Wall Street investment Firms and Banks that will benefit by having part of their loss passed on to the taxpayers . (3)Speculators that cashed out at peak and maybe Mozilo ,who took the money and ran . Commissioned salespeople including lenders agents and Wall Street fund managers who made big money during the boom ,who didn't put it back into a house .(4)Some insurance Companies who have been making inflated policy income based on inflated real estate prices . (5) Wall Street -Because the Corporations benefited from the fake income from the housing boom .(6)People who buy real estate when it crashes to a low and some vulture funds that have capital to pick up property cheap . (7) The criminals win because there are to many of them to bring to justice ,beside their friendly lender told them they could do it .And thats just for starters. (8) The ATM equity extractors who bought a bunch of junk and partied hardy,and are now going to walk and on and on

THE LOSERS (1) Taxpayers (2) Borrowers that put a down payment down who qualified will lose the equity from that saved money . (3) Investors in secondary market that can't sue to re-capture their funds that where backed by mortgages that were deceived that they were buying AAA paper .(4)Boomers that planned their retirement for the last 10 years based on real estate going up by buying houses they are holding and will go broke over the costs and inability to sell them . (5) Neighborhoods lose because of the vacant houses and increase in crime and foreclosures and falling values (6) All people lose because of inflation because of Fed policies (7)Savers lose because of Fed policy of paying little interest on safe funds .(8) The future is compromised because of the debt that builds and the American peoples buying power is reduced and their standard of living goes down .(9)Long term Homeowners who were forced out of their property because of high property taxes that were based on fake inflated values. (10) People that had to move because of economic conditions who were priced out of the market(which might be a blessing )

For a crackerjack analysis of today's Fed move that cuts through the hype and explains what it means:

tinyurl.com/2z993e

Basically, Bernanke just pulled a pin from a grenade and is desperately hoping he can keep it from exploding. He took this extraordinary risk because the entire financial system was teetering on the edge of collapse. If the grenade does wind up exploding in his face, then we're instantly in Great Depression II.

Bahgdad Ben is simply not getting it. Even a trillion dollars injection is not going to make a difference to the housing crash, and all he is doing is pouring water into a leaking bucket. It will look good for a while but the outcome is inevitable and all we are having at the moment is nothing but a fool's rally.

I can tell from the comments here that most of you work for $9 an hour. Boo hoo oil is $110. So what? As a % of income, I spend .1% on gas. If gas doubles overnight and I now spend .2%, I couldn't care less.

To the braggard who boasts about gas only being .1% of his income: Yes, the vast majority of people are not making that much money. Do you really believe YOU will be able to purchase your gas and ride the highways when the MAJORITY won't be able to afford it?Back in 1979 in Levittown PA there was a Gas riot. Protestors in that quaint suburban community had to be broken up by Deputized Police from the local major city (in other words cops used to violence and trouble) Prior to that, the town was held hostage. Fires, looting, the burning of gas stations and stopping motorists and burning their cars. This was when there was still some idea of civility. NOW? I won't be shocked if murder and everything else happens and the army has to be called in when the prices become higher. I think the breaking point is as it gets into that $4-$5 dollar range. Gas thieves will be back!

The market will go up at first, then down waaay down, then it will go up again and up and up and up and then it will go down again and then down and down and then up and down.

Then after it goes down some more, it will neither go up nor down and it will stay that way for a significant period of time (about 2 days) then it will go up again and people will start to invest all they can in the market by borrowing, stealing, liquidating assets to invest in the new market, then it will go down again, then it will go up again and up and up and up and then it will go down again and then down and down and then up and down until it stops going up or down when it will suddenly stand still, the whole world will stand still for a brief moment and then our species will cease to exist in the flash of light and something new will begin.

"I can tell from the comments here that most of you work for $9 an hour. Boo hoo oil is $110. So what? As a % of income, I spend .1% on gas. If gas doubles overnight and I now spend .2%, I couldn't care less."

Idiot. "I couldn't care less." = "I could care more". .1% of your income? Is that because you ride your bicycle to the public assistance office?

Anon March 12, 2008 1:08 PM, there was no greater sense of civility in 1979 than there is today. If anything, today I see more big talk and puffy chests than people actually willing to exert their lazy asses and fight about something. Our public education system is doing a fine job of promoting respect for others - and regarding teaching as a prestigious job.

Don't kid yourself about the 50s after watching reruns of Happy Days, either. TV fiction is not historical record.

Here's your homework assignment - Google the word riot, then get to reading. Riots are not new, and the level of violence has gone the opposite direction than the one you are making up.

No, I see a gas crisis much differently. I'm remembering that news footage of all the people after Hurricane Katrina chanting Help-Help-Help and think that's a lot closer to it.